Brian Lenihan told the Dail that the weakness of the Irish taxation system is its narrow base. He said that too many people did not pay tax at all and there were too may ways in which those had wealth could shelter their income.
How tax changes will affect your income
The Minister said it is no longer sustainable to keep minimum wage earners outside the tax system. He says he wants to spread the burden in a fair manner to a wider range of income earners while avoiding economic disincentive effects.
He says the scope for income tax changes half year through the income tax year is limited. In order to raise the necessary revenues he said he will double the rates of the income levy and to reduce the entry points for each rate. The new rates will be 2%, 4% and 6%. The new entry points will be €15,028, €75,036 and €174,980.
The PRSI ceiling will also be raised to €1,443 a week, or €75,036 a year.
The changes will come into effect from May 1.
The Minister will also reduce the level of tax relief investors can claim on the interest for mortgages and loans on residential rental properties to 75% of the interest with immediate effect.
He also wants to abolish the current special 20% rate applied to the trading profits from residential development land and restrict the treatment of trading losses. He will also get rid of the property-related accelerated capital allowance schemes in the health sector - this covers private hospitals, registered nursing homes, as well as mental health centres.
Mortgage interest relief to be phased out
From May 1, the Government has decided that mortgage interest relief for homes will only be available for the first seven tax years of the mortgage.
Mr Lenihan said the move is justified given the significant recent reduction in interest rates and in house prices. He also said that he will eventually abolish the relief.
The Minister said at this time of the year it is not possible for technical reasons to restrict or abolish further reliefs due to technical reasons.
Mr Lenihan said that he is increasing the rates of Capital Gains Tax and Capital Acquisitions Tax to 25% with immediate effect. The DIRT rate on savings will also increase from 25% to 28%.
He also said that the existing 2% levy on non-life insurance premiums will rise to 3% and the Department of Finance will also introduce a new levy of 1% on life assurance policies.
Diesel prices to go up, petrol remains unchanged
Mr Lenihan said that from midnight, excise duties on cigarettes will go up by 25 cent for a packet of 20 and on diesel by five cent a litre. He said he was not raising the prices of alcohol or petrol because of the major risk of loss of revenue by people going North to do their shopping.
He said the total tax and levies measures will raise €1.8 billion in 2009 and over €3.6 billion in a full year.
